Sunday, July 31, 2011

Evolution of personal computing in one simple picture.

An interesting picture (borrowed somewhere on the web) showing Apple form factor evolution from 1976 to 2007 (click to enlarge).

Since I'm interested in functional, rather than form factor transitions, I can see two major shifts.

The first one, from a command-line general purpose calculator in approximately 1980 (Apple III) to a document- or file-processing machine in 1983 (Apple IIe). Note that the two-dimensional nature of the document required a mouse.

The second one, from a two-dimensional document processor/manager to a content stream device in 2007 with iPhone. Of course, it's impossible to show a mouse replacement - the new zoom-pan interface suitable for interacting with streams.

What's not visible on this picture? Wireless network! A key element in the transition between phase 1 and 2.

tags: system, evolution, payload, tool, interface, 10x, mobile, distribution, apple, information, computers, function

Saturday, July 30, 2011

A review of The Mystery of Consciousness

Philosopher John R. Searle writes in The New York Review of Books:

Weekend edition: A prescription for happiness.

I read the prescription. It ran:

“1 lb. beefsteak, with
1 pt. bitter beer
every 6 hours.
1 ten-mile walk every morning.
1 bed at 11 sharp every night.
And don’t stuff up your head with things you don’t understand.”

I followed the directions, with the happy result – speaking for myself – that my life was preserved, and is still going on.

Three Men in a Boat, by Jerome K. Jerome.

Friday, July 29, 2011

A strategic false belief in trade-offs

In his seminal paper "What is Stragegy?", cited 4367 times on Google Scholar and included into every business strategy textbook, Michael E.Porter writes:

But a strategic position is not sustainable unless there are trade-offs with other positions. Trade-offs occur when activities are incompatible. Simply put, a trade-off means that more of one thing necessitates less of another. An airline can choose to serve meals - adding cost and slowing turnaround time at the gate-or it can choose not to, but it cannot do both without bearing major inefficiencies.

Anyone who flew on a commercial flight recently can attest that the latter part of statement is false (italic, bold - ES). Airlines do serve meals AND they make money on this service by charging for the food. They also charge for luggage and other conveniences, more than compensating themselves for the inefficiencies.

U.S. airlines collected $3.4 billion for checked luggage last year, according to a government report issued Monday. That’s up 24 percent from 2009 and a big reason the industry made money again after three years of losses. In 2010, the major airlines made a combined $2.6 billion in profits, less than they collected in bag fees.

The trade-off once considered fundamental by the top business strategist turned out to be a false belief into what can or cannot be done - a simple lack of imagination. People believe in trade-offs because they are taught to believe in them. Once somebody figures out a way to break the trade-off - puff! - the whole business strategy based on it falls apart.

tags: trade-off, strategy, business, barrier, constraint, soft, trend, innovation, breakthrough, model, quote

Thursday, July 28, 2011

Invention of the Day: Mobile Accessories

I picked out these inventions from the New Scientist 1% section( the name of the section is probably a reference to Edison's famous 1% inspiration vs 99% perspiration quote.)

IBM filed a patent application for an adjustable virtual keyboard, which can be calibrated to user's typing habits. Note that on the picture below keys are of different sizes and not necessarily aligned. Would be a good idea for tablet devices.

Apple filed a patent application on a phone/audio headset that doesn't get tangled as much as conventional wired headsets. Why? Because the cable has sections with variable stiffness. The flexible sections allow the cable to bend, while the stiff ones prevent it from tangling. Kind of neat, but we all know that, according to the ideality principle, an ideal cable would conduct the signal while not existing at all. That's right, wireless cables don't get tangled.

tags: invention, problem, solution, ideality, apple, mobile, distribution, patents, example, interface

Wednesday, July 27, 2011

Ripping off. Take 2.

Dan commented on my post "Ripping-off for fun and profit":

The original Mac was partly a rip off from Xerox Park and the iPod was definitely not the first digital music player. Then again, Apple made significant improvements to the product rather than just straight copying.

I think it's important to address Dan's point in a separate post because his is a very common attitude, stemming from the difficulty to see the difference between invention and innovation. And it's not only about making improvements.

The slide below is from my lectures at "Principles of Invention and Innovation". It shows a chart with dimensions Nobody - Everybody (horizontal) and Idea - "It works" (horizontal). Invention is marked by the blue dot in the left bottom corner. It occurs when one person or a small group of people comes up with an idea. Opposite to Invention, in the upper right corner, is Innovation, marked by the red dot. The path between Invention and Innovation involves turning ideas into working products/ services and having a lot of people use them in real life.

This simple chart allows us to map companies' entry points into a particular market. For example, when Google ripped off Facebook's design and entered social networking with Goolge+, it was way to the right. That is, not only the idea was not new, but it was already implemented by Facebook on a massive scale – hundreds of millions of users. The same can be said about Microsoft when it entered advanced GUI PC market with Windows 95, or its Office and XBox products. All markets with working products built according to the same Invention had already existed and had millions of users. The goal for the company was to take these users away from existing competing implementations, either by offering a price/feature advantage and/or simply applying the marketing muscle.

In contrast, Apple's entry into the GUI PC space happened much earlier. At the time Wozniak and Jobs debuted their machine, the market for such PCs simply did not exist. Xerox machine was basically a lab demo, with no market traction whatsoever. Apple's goal was to create a market, with software, additional hardware, distribution channels, and etc. The same was largely true for Apple's iPod I and iPod Touch introductions. Google had a similar entry into the text ads/search market. The risks in those two types of entry, one to the left and another to the right on the chart, are totally different.

Even Facebook, with all the hoopla about Mr. Z stealing somebody else's idea, entered the market closer to Apple's or Google circa 2000 path. If they, Facebook, were smart enough and filed for patents at the right time, Google would be in the same legal trouble their Android customers are right now with regard to Apple's patent suits. Different market entry strategy entail totally different business risks, that is why it's important to understand at least the basic difference between Invention and Innovation.

tags: invention, innovation, market, patent, synthesis, s-curve, system, business, competition, apple, google, microsoft

Tuesday, July 26, 2011

How embodied math shapes us, humans.

Kevin Slavin about the world of algorithms (15 min TED video):

"... these complex computer programs determine: espionage tactics, stock prices, movie scripts, and architecture. ... we are writing code we can't understand, with implications we can't control. ... we are writing what we can't read."

tags: problem, solution, control, 10x, tool, cloud, art, science, deontic, video, social, intelligence, scale, detection, creative crowd

Monday, July 25, 2011

Everyting's under control, Captain!

Growth in the number and variety of portable devices spurs growth in content demand and, as a result, increases the stakes in the battle for owning the marketplace for content-related transactions. So far, Apple has been a dominant player in this space and it seems like neither Google, nor HP can seriously challenge Apple's position. In February of this year, Apple announced a new in-application sales policy for iOS–compliant devices that forbade external payment and subscriptions links. In short, all transactions have to happen within the application itself.

From a CNN report:

Apple's goal is to steer more of the revenue for content purchases through its own in-app payment system, which typically nets Apple a 30% cut of the sales.

On Monday [July 25, 2011], Amazon updated its Kindle apps for Apple devices to remove the "shop" button that sent consumers to Amazon's site to buy digital books.

Hulu changed its iPad app last month to remove a link to its website.

..the Google Books app disappeared from the App Store last week. Sony's Reader app has been unavailable since February, when Apple booted it because of an external link.

For Stanford CSP BUS74-75 students: You can see how Apple successfully shifted its business model axis from Source-Tool to Distribution-Control. Owning iTunes, first as a free PC application, then as a cloud service that includes AppStore and other marketplace entities, is an essential part of this strategy. Note that Microsoft (xbox) and Facebook have implemented similar in-game purchasing policies earlier.

tags :business, model, control, distribution, system, evolution, apple, google, information, market, transition, games

Sunday, July 24, 2011

Foxes vs Hedgehogs

From an essay by Dan Garner and Philip Tetlock about the depth of our ignorance in forecasts:

Some even persist in using forecasts that are manifestly unreliable, an attitude encountered by the future Nobel laureate Kenneth Arrow when he was a young statistician during the Second World War. When Arrow discovered that month-long weather forecasts used by the army were worthless, he warned his superiors against using them. He was rebuffed. “The Commanding General is well aware the forecasts are no good,” he was told. “However, he needs them for planning purposes.”

One of the goals of the Reverse Brainstorming technique is to expose things we don't know. "We don't know X, Y, Z" should be on every problem list the group is considering.

Another point to take from Tetlock's other work on decision pattern analysis would be the distinction b/w "foxes" and "hedgehogs."

“the fox knows many things but the hedgehog knows one big thing.”

The experts with modest but real predictive insight were the foxes. The experts whose self-concepts of what they could deliver were out of alignment with reality were the hedgehogs.

The Three Magicians, esp., the second one (Climb on the Roof) should be good for finding alternative scenarios, i.e. simulate the "fox" analysis pattern.

tags: magicians, 3x3, innovation, reverse brainstorm, problem, solutions, quote, information, learning, method, detection

Friday, July 22, 2011

From Stanford Entrepreneur Corner:

In this 12 min snippet of the talk LinkedIn Co-Founder Reid Hoffman discusses rules of thumb to help individuals looking to create new products and companies:
1) Look for an opportunity brought about by major trends ("moving to the wild west vs moving to next town).
2) Aim to make a really big change in the world because it takes as much blood, sweat, and tears to create something big, as to create something small,
3) Build a network around your company, i.e. create and engage a creative crowd;
4) Plan for good and bad luck: proactively discover opportunities along the way and kill unneeded activities to save limited resources;
5) Maintain flexible persistence: listen to your customers and ignore them at the same time (a solution to the innovator's dilemma)
6) Remember these rules are just rules of thumb by which you navigate.

Other parts of the talk are also worth watching, esp. where he talks about scalability in parts 5, 7, 8.

tags: innovation, startup, 4q diagram, 10x, business, model, dilemma, scale

Thursday, July 21, 2011

An ancient business recipe for modern success.

In 2009, I commented on the similarities between eBay and ancient king Croesus: in both business models one becomes enormously rich by owning a money standard. 2,500 years ago, the newly introduced money standard was gold coins, now, it's digital coins. eBay's 2009 strategy to make PayPal the largest part of the company is beginning to bear a hefty fruit:

CNET. July 20, 2011 1:44 PM PDT.

eBay reported second-quarter earnings of $283 million, or 22 cents a share, on revenue of $2.76 billion.

Overall, PayPal is carrying eBay. PayPal delivered its first $1 billion quarter and had 100.3 million registered accounts, up 15 percent from a year ago.

Note, that this growth happened during one of the worst recessions in American history. This would make Croesus proud. The business model he invented in the 6th century BC continues to work like a charm.

tags: money, business, model, commerce, system, deontic, payload, transfer, economics

Wednesday, July 20, 2011

The dangerous abundance.

The headline on a popular website reads: Blistering heat wave stressing nation's power grid. Just below the alarming title, the very first paragraph describes the nature of the predicament:

NEW YORK (AP) -- A lengthy, blistering heat wave that is blanketing the eastern half of the United States is putting significant stress on the nation's power grid as homeowners and businesses crank up their air conditioners.

In other words, the problem is that we are getting so much free energy from the Sun that we have to produce and transmit enormous amount electricity to counteract harmful effects of this dangerous solar energy abundance. Funny, huh? It's like carrying a huge, heavy backpack full of canned food into a paradise medow filled with lots of edible plants and game just because you don't know how to find the right food there.

When three hundred years from now people try to explain this strange human behavior, they probably think that we, their distant barbarous ancestors, were Sun worshipers and could not allow themselves convert sacred sun rays into useful energy, preferring death and suffering to life in comfort.

tags: technology, evolution, health, system, energy, problem, solution, example, synthesis, source, information

Tuesday, July 19, 2011

Ripping off for fun and profit.

"Jobs was angry because he felt that Android was ripping off the key features of the iPhone."

Nowadays, Mark Zuckerberg probably feels the same. With Wave and Buzz, Google's home-grown attempts at social networking, Google tried to use gmail to get people into their user base. It didn't work because Wave and Buzz had interfaces and functionality very different from Facebook, a dominant design in the social networking space at the time. People decided not to move into an unfamiliar territory.

Now, with some tweaks, the new Google+ service is an obvious ripoff of Facebook, with a little bit of LiveJournal functionality - circles instead of friendlists - thrown in. It feels familiar, it looks familiar, it acts familiar. People seem to be moving in in millions.

Innovation by ripoff appears to be a winning business strategy for Google. They've done it with other major commercially successful products: Overture (text ads model - AdWords), Yahoo Maps (Google Maps), Youtube (acquisition after Google Video failed), iPhone (Android), and now Facebook (Google+). In many ways, this is similar to what Microsoft did in the 1980s and 90s - use their dominant operating system as leverage and a cash cow to rip off successful technologies: integrated software development tools, Windows PC interface, video gaming machine, office suite software, web browser, database/SQL solutions, and others.

No wonder Steve Jobs was angry about Android. It probably felt like a déjà vu, though this time it was Google, not Microsoft, ripping off Steve's ideas.

By the way, if you are into vintage bumper stickers, there's one for you on eBay right now:

tags: innovation, technology, business, model, platform, computers, history, microsoft, apple, google, facebook, social, networking, information

Monday, July 18, 2011

Invention of the Day: Zen Puzzle.

A group of Russian designers created the most challenging puzzle ever:

The image you need to assemble is pristine white. The team promises you achieve true enlightenment when you solve the puzzle.

Good luck!

Sunday, July 17, 2011

Open, as "with holes."

One of the biggest holes in the Open Innovation approach is its lack of a working Intellectual Property  model. For example, Google publishes its Android operating system as an Open Source project and mobile device manufacturers, such as HTC, Motorola, Samsung and others pick it up for free. But at the same time, the manufacturers are vulnerable to patent suits because Google does not indemnify them from patent infringement claims when they use Google's technology. Just a few days ago, ITC ruled that HTC infringes on two Apple patents and can be barred from exporting Android smartphones into the US. Similar suits are pending against Motorola and Samsung.

In contrast, Microsoft, which licenses its proprietary mobile OS to device manufacturers, provides a reasonable protection against such legal attacks. It's quite possible that for software developers the uncertainty surrounding Android's future becomes a factor in the decision about the go-to-market application platform. It could also become a barrier to the adoption of Android in the enterprise market.

At the same time, it's important to realize that in countries that don't enforce Intellectual Property rights all kinds of mobile devices can be put together at zero licensing cost. There's a whole cottage industry of youtube videos on how to run Android on iPhone. Further, you can freely buy one of those hybrid smartphones in China at a fraction of their US retail price.

tags: mobile, information, intellectual, property, business, model, control, innovation, technology, patents, google, apple, microsoft

Thursday, July 14, 2011

Online Dating: the business of unhappiness.

The New Yorker has a big article on the state of affairs in $1B/year business of online dating. With what we know about the psychology of choice and happiness, the current model is bound to generate regrets about imperfect choices. And the more regrets, the more "inventory" turnover. That is, unhappy people come back for a dip into potential happiness. In some ways, the business model with a flat-rate pre-paid fee is bound to create more "purchases." We've seen this effect at work at all-you-can-eat buffets or, more recently, with Amazon introducing free or flat-fee shipping plan for their customers. That is, when the total price is fixed, people try to maximize the number of transactions, which, in turn, leads to a higher turnover, and as a result to low happiness.

Furthermore, the reward structure for service providers is not tied to happiness:

There is, as yet, a disconnect between success and profit. “The way these companies make money is not directly correlated to the utility that users get from the product,” Harj Taggar, a partner at the Silicon Valley seed fund Y Combinator, told me. “What they really should be doing is making money if they match you with people you like.”

tags: business, model, innovation, problem, psychology, control, information, market, communications, internet

Tuesday, July 12, 2011

Nanotechnology appears to find important applications in human medicine:

Surgeons in Sweden have successfully transplanted a fully synthetic, tissue-engineered organ—a trachea—into a man with late-stage tracheal cancer.

The scaffolding for the trachea was built by a team led by Alexander Seifalian, professor of nanotechnology and regenerative medicine at University College London. Tissue was grown on top of the scaffold from the patient's own stem cells using the "InBreath" bioreactor from Harvard Bioscience. The scaffold was seeded with a solution of stem cells taken from the patient's bone marrow, and kept warm and sterile as the scaffold rotated inside the bioreactor while the cells grew into tissues. The entire process took about two weeks.

I wonder how much time it will take to make novel organs with capabilities totally new for humans, e.g. ultra-sound vision or using electricity instead of organic food for energy needs. Compared to these tasks, growing extra brain cells to increase one's creativity would seem like a rather straightforward technology.

In the meantime, new devices allow us measure, evaluate and then improve the quality of sleep. Since sleep is a major contributor to our intellectual abilities, Zeo monitor is a must have gadget for every creative person in the world.

tags: biology, science, creativity, intelligence, detection, control, brain, system

Monday, July 11, 2011

The death of the "green energy" trade-off.

CNet reports on the predicted demise of the current vision of green energy where the energy is produced at high cost with massive government subsidies.

The July/August edition of Foreign Affairs features "The Crisis in Clean Energy--Stark Realities of the Renewables Craze," which offers a grim outlook for solar, wind, and other green technologies--a crisis that will make it tougher for the U.S. to address energy security, the trade deficit, and global warming. Another piece by Devon Swezey of the Breakthrough Institute, teeing off the Foreign Affairs article, calls it "The Coming Cleantech Crash."

Contrary to the report, I believe green energy will do well long-term. Today, electric energy is a commodity, therefore a new method of energy production has to be competitive with the old methods. Otherwise, it will not be widely adopted by businesses and consumers. As I wrote before, there are good technologies and business models available to companies that want to deploy solar panels in residential areas. A real breakthrough is still ahead of us, but we won't achieve it unless we drop the old thinking that green energy cannot become competitive without huge government subsidies.

tags: inertia, trade-off, problem, energy, synthesis, system, economics, business, model, psychology

Sunday, July 10, 2011

Rhetorical question of the day.

VentureBeat asks:

Mobile gaming is the wide-open battleground of the entertainment industry. While Zynga dominates social and big publishers rule console games, the global smartphone game market is up for grabs. Since there are potentially billions of users in this market, mobile gaming could become the largest game market of them all. Who will win it?

Answer: Apple. They get 25-30% of revenue from every game sold with 0% in R&D costs.

tags: games, mobile, business, model, information, payload, deontic

Saturday, July 09, 2011

DARPA: Education Dominance research.

via Wired:

Darpa, the Defense Department blue sky research shop, has been hard at work on the muscularly-titled Education Dominance Program aimed at creating digital tutors for troops. It’s worked pretty well thus far, too. When researchers looked at students using Darpa’s digital tutors for Navy IT training last year, they found that those using Darpa’s digital study buddies learned “substantially more” (.pdf) and did so in a much shorter time period than other students.

Fifty years from now DARPA–inspired study buddy will come with a "textbook" as an automated tutor-friend on you favorite social network. We won't have Matrix-like direct skill download, but most of the basic training in core school subjects - Math, Language, Creativity - will be incorporated into virtual learning environment.

tags: education, information, innovation, technology, social, network, cognition, 3x3, interface, interaction, psychology

Friday, July 08, 2011

Selling shopping data to retailers

A new business model is emerging in banking:

Many of the nation's leading banks are using information about their customers' shopping habits -- how much they spend, where they shop, what they buy -- to make money.

Based on that data, retailers are offering targeted discounts via the banks through text messages, email and online bank statements.

The banks don't actually hand over your data to retailers. Instead, retailers describe what type of customer they'd like to target and the bank then sends the deal to customers who fit the profile. When the customer cashes in on the deal, the bank gets paid a commission.

In many ways, this is not conceptually different from the good old method of stuffing discount coupons into your credit card bill envelope. But somehow, it still feels much different. One key difference is the frequency at which the banks can now offer deals. Instead of a once-a-month affair, they can provide daily or even hourly offers through e-mail, web, mobile apps, SMS, etc. Another - very low transaction costs: no paper, no envelopes, no people or even machines producing coupons. Finally, and in contrast with Groupon and the like, no user registration is required. That is, by being a credit or debit card customer you are almost automatically enrolled, which means extremely low customer acquisition costs. Overall, should work well as part of a mobile shopping app or a promotional campaign.

== 10x tag relates to an order of magnitude change in frequency and cost of service.

tags: business, innovation, model, information, commerce, advertisement, 10x

Business model innovation: scutage.

At around 1100, English king Henry II conducted a number of financial and administrative reforms, which allowed him to create a well-trained professional army and conquer territories far beyond the British Isles. Here's how it was implemented:

Rather than relying on the customary military services of forty days owed him annually by his tenants-in-chief with their retainers, he began insisting that these feudal services should be commuted into a cash payment or ‘scutage’ (from the Latin, ‘scutum’, a shield), a process as welcome to the barons as to Henry’s finances. With the proceeds Henry was thus able to build up a more reliable and more mobile, permanent professional army of mercenaries, or ‘soldiers’ as they became known thereafter, from the ‘solidus’ or king’s shilling that they earned.

History of Money, by Glyn Davies. p. 142.

What are the advantages of the new vs the old military service model?

The first advantage would be a greater degree of specialization, which is a common attribute of almost any successful business model innovation. With the introduction of scutage, the barons could specialize in making money, e.g. by improving agriculture, crafts, and trade within their domains, while the king could specialize in soldier selection, training, and military strategy.

Another one, would be a greater control over resources. The barons could now control the timing and scope of labor use, which in the old model could've been taken away from them at arbitrary times, e.g. during harvest gathering or seasonal forest clearing for agricultural needs. At the same time, the king gained direct control over army mobilization time, which in the old model depended on the willingness and ability of barons to provide requested manpower according to the kings needs.

Finally, scoutage led to growth of a new class of professionals - mercenaries whose only purpose in life was warfare.

The structure of this business innovation is similar to the transition undergone by the computer industry in the 1970-80s: from IBM enterprise model, where software and hardware were provided as one package with a series of periodic custom updates, to PC-based shrink-wrap software sales, a model Microsoft eventually rode to world dominance in 1980-90s. In both cases we saw a replacement of obligation-specific (in kind) transactions with obligation-generic (money) ones. As a consequence, a new class of specialists developed, mercenaries in the beginning 12th century, pure software firms in the end of the 20th century.

tags: business, model, innovation, history, software, industry, information, technology, computers

Monday, July 04, 2011

A 10X change in aviation technology.

According to the Washington Post:

Military planners worldwide see drones as relatively cheap weapons and highly effective reconnaissance tools. Hand-launched ones used by ground troops can cost in the tens of thousands of dollars. Near the top of the line, the Predator B, or MQ9-Reaper, manufactured by General Atomics Aeronautical Systems, costs about $10.5 million. By comparison, a single F-22 fighter jet costs about $150 million.

tags: technology, 10x, detection, drones, source

Invention of the day: a USB mouse that hacks your PC.

For this attack, the security experts equipped the mouse with an additional micro-controller with USB support (Teensy Board) to simulate a keyboard, and added a USB flash drive to the setup.

When connected to the PC, the Teensy Board's Atmel controller sent keyboard inputs to the computer and ran software that was stored on the USB flash drive. This allowed Netragard to install the Meterpreter remote control software, which is part of the Metasploit framework.

The crux of the attack was to find a suitable company employee who would, upon receiving the computer mouse, connect it to a company PC without becoming suspicious.

The security experts selected one of the employees and sent the mouse in its original packaging – camouflaged as a promotional gadget.

[In a related study] the US Department of Homeland Security found that 60 per cent of users will naively connect a USB flash drive to their PC to see what is stored on it.

This reminds me of stories about medieval poisoning plots involving members of the treacherous Borgia family. They didn't use the bite of a poisoned mouse, though.

Thinking aloud...

A typical hacking attack involves 0) getting a person in a position to enter a malicious command; 1) entering the command; 2) downloading malicious software; 3) installing the software; 4) performing a malicious operation; 5) cleanup and/or escape undetected.

It would be interesting to map major key security penetration cases to this sequence of steps, from ancient Trojan Horse to Enigma to Stuxnet.

tags: invention, innovation, security, information, system,  control, five element analysis

Sunday, July 03, 2011

Over the last month, Google and later Microsoft pulled out of the power meter business (thanks to John Kelly for the link).

I'm really tempted to say, Told you so!
Data-driven approach works only if you have the ability to change the situation. For example, you can easily calculate fuel efficiency of your car, but if you don't have the money to buy a new fuel-efficient car or if purchasing the car doesn't provide any savings, repeated calculations or metering won't help you at all.

The assertion that consumers will reduce their energy consumption by up to 15 percent has never really panned out in reality. It's been a favorite of PowerPoint presentations, but the actual savings are often far lower. OPower has some of the best results for reducing energy consumption via information and on average it gets consumers to reduce consumption by 3 percent or so. EcoFactor, which automates energy management, says it reduces power by around 17 percent more than demand response services: the key to EcoFactor's success is allowing machines, not humans, to handle many management tasks.

Invention vs Innovation, the patent dimension.

NYT reports on the largest patent-related transaction ever:

Nortel Networks, the defunct Canadian telecommunications equipment maker, says it has agreed to sell more than 6,000 patent assets to an alliance made up of Apple, Microsoft and other technology giants for $4.5 billion in cash.
The group of companies, which also includes Research in Motion, Sony, Ericsson and EMC, beat out Google and Intel for the patents and patent applications that Nortel had accumulated when it was still one of the largest telecommunications equipment makers in North America.

The decline of Nortel is quite remarkable. The company was one of the first firms to develop advanced wireless data and internet routing technologies, but couldn't capitalize on them in the marketplace, eventually going bankrupt. The breadth and depth of their patent portfolio relating to the fast-growing mobile networking industry is staggering, which explains the multi-billion dollar bids.
Google will probably end up paying significant royalties on these patents.

tags: invention, innovation, patents, business, mobile, competition, portfolio

Saturday, July 02, 2011

Evaluating ideas.

Bill Gross, Idealab's founder and CEO, talks about a way to quickly test ideas (3min video).

This is just a snippet of his talk, his full talk at Stanford's Entrepreneurship Corner is about making new ideas succeed in the real world.

tags: innovation, education, information, ideas, business, value

Friday, July 01, 2011

Invention of the day: Depreciation of virtual goods.

WSJ reports on novel accounting rules used in Zynga's books.

Zynga Inc.'s filing to become a public company answers the question of how the social gamer plans to book real money from the sale of virtual goods, which make up the vast majority of its revenue, expected to total more than $1 billion this year.

For example, a player of Zynga's CityVille might purchase energy, which Zynga classifies as a consumable because its full use comes at the election of the player. When the player buys the energy, Zynga records the purchase as deferred revenue on the balance sheet, and when that player uses the energy in gameplay, the revenue is recognized on the income statement.

Conversely, a player might buy a tractor on FarmVille to help manage a virtual farm. Similarly, the revenue is immediately classified as deferred, but it is recognized on the income statement ratably over its estimated useful life, just like a durable good in real life.

Except in Zynga's case, it isn't rust or a broken axle that will determine when the tractor has outlived its usefulness, it's when the player stops playing the game.

Very clever. Like with any other toy, things become worthless when they are no longer fun to the player. Instead of attention span, we can now talk about "fun span" of users to characterize their interest in a particular item. In a world where the difference between real and virtual is becoming smaller and smaller, changes in fun span could have a major impact on the country's GDP. Also, imagine opportunities in trading fun options along with oil and pork belly futures!

By the way, I checked with Google search and it appears that I just invented the term "fun span."

tag: invention, innovation, virtual, games, economics, psychology.